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tv   Mad Money  NBC  June 8, 2012 3:00am-4:00am EDT

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and what to wear at a wedding. >> we'll see you on friday. >> did you have a good time? >> yeah, i sure did. -- captions by vitac -- i'm jim cramer. and welcome to my world. you need to get in the game! he'll go out of business. and he's nuts! they're nuts! they know nothing! i like to say there's a bull market somewhere. "mad money." you can't afford to miss it. hey, i'm cramer. welcome to "mad money." welcome to cramerica. other people trying to make friends. i'm not just trying to entertain you but teach. 1-800-743-cnbc. call me. sometimes whether or not you understand this market comes down to when you take a shower, how long it lasts. today we saw a true tug of war between china and europe. with the united states caught right in the middle. ♪ this morning we had terrific gains. dow up 140 points.
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[ applause ] all thanks to a rate cut announcement from china. [ gong ] just after 7:00 a.m. eastern daylight time. but as the day wore on, worries about europe and our own domestic impotence caused the averages to tumble. although it still finished up 46 points, s&p, nasdaq sinking. .48%. >> the house of pain. >> but you would have never known about the tug of war just looking at the closing prices, but don't i know it. i get up at my usual time now, 4:00 a.m. i witness the to and fro of the bond markets because of the key early morning spanish ten-year bond market. yes, that's right. if you want to make sense of the u.s. market these days you got follow the nitty-gritty trevails of spain. the european markets were on tenterhooks waiting for the results of spain's attempt to raise money. how much would it cost them, 6%, 5%, 7%?
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each auction measures the perceived health of spain and since it's so important, therefore europe as a whole. you grade an auction by how much money the spanish government raised and how high an interest rate they have to pay. how many people wanted in on the auction or not. consider spain like a bad gambler. while the lenders alternate between shylock and tony soprano. shakespeare meets bada-bing bada-boom. this time the tonys and the shylocks want the money at 6%. the european stocks immediately bounced, but they didn't bounce hard. 6% was higher than the 5.75% spain paid last time around. yes, these little granular bits of data matter. everyone is tweeting about whether the spanish bond auction is good enough. simultaneously while watching the markets trade up this morning. i got one eye on the s&p futures. they're not jumping as much as i thought on spain's auction. barely rallying. aha, i say to myself, we can't match yesterday's rally, maybe there's no secret deal. after 2 1/2 hour of actually
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watching every tick of the futures in the so-so european markets, satisfied that europe wasn't going to hurt us that much even though it might not help us that much either, i jumped into the shower. i had had enough. i had to get ready for my day! from my forensic analysis, right between the time when i shampooed my hair and pretended that it mattered that i apply conditioner, china cut its rates. a real cut, first cut in years, giant dan -- gigantic. impact. sure enough the u.s. futures exploded higher, literally tripling from where they were before i turned the water off. couldn't find the wash cloth. that's why we rallied hard most of the day. not because i couldn't find the washcloth. none of that morning routine, particularly the shampooing and condition ing details and the irish spring soap, matters that much to you. what matters is what ben bernanke said on capitol hill. he's like the fed chief, right? congress is a key venue. bernanke's speech q&a, we hang on every word. what i'm saying now is you need to stop hanging on every word. all the positive action happened
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between 4:00 and 7:00. i like a good piece of senate testimony as much as anybody, but the fed has nothing on spain or china when it comes to impacting our stock market. that's why i'm giving you the true mundane blow by blow because i want you to know what time it happens, how much the portfolio is worth and how much you're worth. your brokerage statement sinks or swims as the red chinese. and a country that arguably hasn't been a lot of importance since 1492 except maybe a little slice, '30s, the lincoln brigade in reverse. you have two countries, the people's republic of china and the united states. china has deposit rates set by the central bank we have deposit rates that are pretty much nil. the chinese central bank has a ton of percentage points they can lop off to get that economy moving. the united states -- ♪ -- so which should we care more about? as far as i'm concerned i'd rather be beijing listening to their fed chief than ours.
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but when it comes to world's finances, nobody competes with china. they have what i call the firepower. they have the will and the wind to maneuver. here in america neither bernanke nor the congress nor the president can fire let alone maneuver. it was pretty much set in stone by 7:00 a.m. sure the media wanted to play pin the tail of the rally on bernanke. we always like to do that. but one look not at the closing averages but the original rally told you it was a china rally. when the market gave up, china plays united technology. closed up $1.76. china infrastructure, elevators, heating equipment. ours? no, we have to press the north american truck numbers. cummins makes truck engines for china. that's why it racked up the $1.54 gain. i could tick down a half dozen other industrials that powered this morning's rally. almost all because of china. we're in a new world. parsing ben bernanke's words that's like looking down the barrel of a .22 caliber pistol, the kind i used to carry,
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without fear because there are no bullets left in the gun. it gave up the ghost by this afternoon. by the end of the day we weren't at all excited about what bernanke said. we worried about europe. as we approached the close, that's exactly what happened. and what could go wrong over there. we went negative, at least in the nasdaq. unlike us, the chinese have a whole arsenal of weapons, loan rate cut, deposit cuts. you know they're like schwarzenegger, the actor, not the governor, when he takes on guys in "commando" or at least tony montana in "scarface," we don't even have a little friend. but by the european close the fleas had infested the dog. there wasn't a darn thing the dog could do which is why the rally couldn't be sustained. it's all china versus europe from here. because in the united states we're simply out of ammo. that's how china can push us up and then europe can push us back down. right now we're powerless to stop any of it. our ethnocentricity, jingoism and xenophobia may be blinding
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us to what's really working in our markets and why. we're paper, spain's industrial strength scissors and china is a thermonuclear rock. the moral of the story -- we may still be hostage to europe now that our economy has stalled a bit, but at least there's a counterbailing force the chinese rate cutting, that can help us rally even for only part of the day. a major improvement from 24 hours ago when the whole world seemed to be aligned against us. hey, let's go to alex in homestead, new jersey. >> caller: boo-yah, jim. thank you very much for helping us gamers get through the wild stock market activity. without your expertise, it would be far worse. >> thank you. thank you very much. let's go to work. >> caller: my question is lululemon, you had recommended them a couple of times and compared them to a nike. they came up with their forecast today, which i guess didn't meet
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the analysts' expectations and now the stock has dropped significantly. do you think it's a good investment? should we hold it? yes. i like lululemon very much since the show started. i don't want to back away from it. the company has a history of beating numbers and lowering expectations which they did again. and it's been a great buy point. i know hank greenberg disagreed with me on "street signs." he has every right because tomorrow he turns 60. happy birthday, herb! anyway, i'm sticking with lululemon. let's go to tony, please. tony. >> caller: how you doing, jim? good, good, thanks. i'm calling about gol, brazil's second largest airline. i know they're down about 40% for the year. wanted your output for their long-term growth knowing that you got the world cup and the olympics going to brazil in the next coming years. where do you see this airline going and they're poised to grow? >> i don't like brazil. i don't recommend airline
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stocks. so you got like a double bear going there. so i'm going to most definitely say, no, no, no, sell, sell, sell. rock, paper, scissors. we are paper, spain's the scissors, china's the rock. are we still hostage to europe after today's action? yes. but at least china shows us a way out of the mess. "mad money" will be right back. coming up, brand power. the markets bouncing back, but international fears still linger. so cramer's intensifying his search for stocks with domestic security. can american teens' desire to be in vogue help protect you from the dreaded euro drama? and later, pizza anyone? >> domino's pizza. >> domino's had been the market darling in 2011 as its dough more than doubled. is the recent pullback your chance to grab a slice. the ceo in a lot less than 30 minutes. plus, poorly suited?
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this retailer showed promise, but wall street tore it apart after disappointing earnings. cramer's breaking down what went wrong. and fitting this stock for a jumpsuit when he locks it away deep inside the sell block. all coming up on "mad money." we all know there's nothing more important than family. >> on june 15th, we're celebrating our fifth annual edition of "mad money, it's a family affair." >> once a year only. check it out. >> want to join cramer in studio for the special event? >> a brotherly dispute. >> all the doctors in the house. >> head to to sign up for free tickets. >> the family that invests together stays together. miss out on some mad money? get your mad money text alert today. mm to 26221. for more information, go to
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make your move. we'll take the 5-hour energy. smart move. 5-hour energy. hours and hours of energy. stocks may be rebounding at the moment, but this market is still very much a hostage to what happens in europe. and that means you need to stay cautious, as we saw most clearly in the reversal at the end of the day after a spectacular opening. you have to take your portfolio from the potential european fallout even as the best case
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scenario buyers were back at the open today. when you're investing okay to hope for the best but you need to plan for the worst. and that means owning stocks that give you domestic security, meaning stocks of companies that don't do any business overseas. ♪ it means sticking with companies that have catalysts which aren't dependent on the pace of hiring or of economic growth. in short, you want to stick with a company like -- ♪ -- ascena, asna. the retailer formerly known as dress barn. one that only does business in the united states and canada. why ascena? because i'm in love with the fabulous styles at dress barn where women go to buy inexpensive clothes? no! it's because it's more than dress barn. this company had one of the greatest turnovers i've ever seen. incredible track record of buying up neglected brands and then whipping them into shape. the process is a proven moneymaker. for years it's been building up its portfolio brands to appeal
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to different demographics. the original dress barn brand which has 800 stores in 48 states. then they bought a brand that appeals to 20-something women, bargain shot. then in 2009, they bought justice, which was a tween retailer which operates store in the united states, puerto rico and canada. they have been incredibly successful. and a big reason for the name change because it isn't just dress barn any more. it is now a dominant specialty store player and this is the kind of bricks and mortar business that can't be poached by amazon, see that best buy again today, and people like to buy their clothes in person, otherwise they may not fit. i'm sure they do some online. so it would acquire charming shop on may 2, you better believe i sat up and took notice given this company's record of acquisitions.
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they're paying $890 million. lane bryant, catherine plus sizes and fashion bug with a total of 1857 stores all over the country, although i remember because i'm from philadelphia, this is really where they got started. i think the charming shops acquisition which will happen this month is a brilliant idea for ascena. the market agrees with me. it jumped from 19 to $21. when the stock of the acquire takeover announcement, you know something good is going to happen. but since then it's pulled back along with the rest of the market falling to $18 and change. below where it was when charming shops' deal was first announced. to me, that's crazy. to me you're getting opportunity to buy this stock with a proven way to win, buy, buy, buy, with a terrific discount to where i think it will be next year at this time. why am i so confident in ascena? because these guys know how to do takeovers. consider what happened to the stock after the last two acquisitions. piper jaffray outlined in a terrific piece of research, the
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day before it announced it would buy maurice's in 2005, the stock rallied an amazing 175%. that's so incredible that some people call ascena maurice. no, that's steve miller's "gangster of love." was the gain a one time thing? no, not a one-time thing. since it happened again when ascena bought justice in 2009. the deal before it was announced where they discussed the deal's completion, the stock jumped 97%. these are two amazing rallies. both fueled by the handling of the takeovers. how do they do it? with both maurice and justice, they were conservative with the forecast right from the outset, then they went on to deliver much bigger than expected cost savings from each deal. in other words, they practiced upod, underpromise, overdeliver, and it worked like a charm, as so often it does.
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believe me when i tell you that ascena is doing the same thing with charming shops, it's definitely happening. as of now, the company is once again keeping that lid tight on expectations. i wouldn't be surprised if there's upside not baked into the numbers yet. in fact, i bet this deal sets the stage for ascena to deliver better than expected earnings for two years, which is what happened after they bought maurice's and justice. the most recent quarter, squishy. they reported last week on may 31st. it was seen as a disappointment by some. company earned 34 cents a share, was looking for 36. market was looking for more. when you backed them out, the quarter was fine. that said, there's much more to this story than just the charming shops acquisition. it represents one of the greatest retail turnarounds. it manages to boost earnings while shifting away to more fashionable clothes, higher price point. bigger margins. but the thing that i think has eluded ron johnson, the new ceo, who is failing right now to turn around jcpenney is that ascena does things slowly.
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they rolled out the new merchandise gradually, not so to shock their customers. the earlier customers liked it. don't turn them off. now they're building on the success. a new concept with a store within a store. like locations of justice, their tween brand. plus ascena didn't abolish coupons like penney's did. their customers want to know they're getting good values, the only way they can tell for sure is if something is marked down in a drastic way. we know from a shocking survey in the "l.a. times," people messing around with facebook. david jaffee understands that turnaround and retail concept you got to do things gradually. you got to keep a lid on expectations so you can blow them away when the results come out. he's proven himself and that's why it's such a terrific buy now that it's pulled back and you're getting it for less than it was trading before the announcement. ascena has managed to turn an old and dowdy name like dress barn, to one that will include charming shops.
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and given this company's track record when it comes to acquisitions, i would buy the stock right here before that deal closes later this month. "mad money" is back after the break. coming up -- pizza anyone? >> domino's pizza. >> domino's had been a market darling in 2011, as its dough more than doubled. is the recent pullback your chance to grab a slice? cramer delivers his exclusive with the ceo in a lot less than 30 minutes. kick start your training routine...
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what should we do with the stock of domino's pizza? in 2010 and 2011 it was one of the greatest comeback stories ever. the company expanded all over the world to the point where they have 9,000 locations in more than 60 countries. they dramatically improved the quality of the pizza. they came out with an honest advertising campaign. they developed a terrific online ordering system for the pizza. that's been a huge success. more on the app in a moment. as a result domino's delivered quarter after quarter results. the stock rallied 90% in 2010 and doubled again in 2011. the analyst community has gotten worried about a slowdown in the united states. in the recent quarter nothing to write home about. back on may 1st, it reported earnings weaker than expected. after improving a fabulous $3
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per share special dividend back in march, domino's has been clobbered, down 21% in the last two months. on the other hand, the company's input costs are clearly coming down in a major way with everything from the fuel they use to deliver the pizzas to the ingredients they use to getting them cheaper. looks like it's headed lower according to dean foods. what do we have here? has domino's lost its mojo or are we getting a viable pullback is the recent pullback your chance to grab a slice. the ceo in a lot less than 30 minutes. plus, poorly suited? this retailer showed promise, but wall street tore it apart after disappointing earnings. cramer's breaking down what went wrong. let's talk about patrick doyle, to find out more about where his company is headed. welcome back to "mad money."
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>> hey, jim, how are you? >> pretty good, pat. how about you? >> doing great, thanks. >> all right. i want to talk first, before we get into the nitty-gritty here, you do have an unprecedented $1 million mark that you hit in u.s. digital sales. 30% of your sales are now from online. that means a lot of labor costs down. tin put costs are down. this happened with lightning speed. >> yeah. it's absolutely right. so we just finally passed that threshold. so for the trailing 12 months we did billion dollars online in digital sale in the u.s. alone and about a comparable about amount outside the u.s. and we're over the 30% mark in terms of the digital sales. great for profits, better customer experience, labor costs, you know, eased with that, and as you saw in the first quarter, the margins on the stores have been definitely, you know, showing the effects of that. >> and getting 50% off when i order this weekend because every window -- as you know, i'm a huge domino's fan and doing it with my vegetarian daughter.
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now, let's talk about not the margins but some of the worries that the analysts have brought up. we have to drill down because they're raising questions that i think are legit. here's a piece by goldman sachs. and they are saying emerging market story unfolding, u.s. unclear. u.s. trajectory now uncertain. they're talking about a defender slowdown in the u.s. pizza delivery market appears to be shrinking, true or false? >> now, the category is actually up a point or two, you know, overall in total pizza. delivery has been about flat. and, you know, really what you saw i think in first quarter is when we came in with a comp of 2% right in the middle of our long-term guidance of 1 to 3, that's where we're going to be most of the time. so i think expectations on domestic comps had clearly gotten a little bit ahead of that. a little bit of a reset off of it. but if we do that 1 to 3% on an ongoing basis with the kind of growth we're getting in
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international and then deploying the cash, you know, the way we have to best benefit the shareholder, we're going to generate terrific returns. >> i got to know. you're still sticking by your long term, not your short-term 5 to 8% growth and you're not backing away from that? >> that's absolutely right. 5 to 8% on total retail sales globally is where we think we're going to be most of the time. and that's absolutely where we are. >> should we begin to think of your story a little bit more like young which recommended for year, not because the united states, because yum! which is taco bell, kentucky fried chicken, pizza hut, hasn't done that well in the u.s. but the international expansion is terrific. is that the way domino's should be viewed? >> we're going to do well in the u.s., but we just in the first quarter we just passed an inflection point. we've now got more stores and sales outside of the u.s. than inside. so as you move forward, there's no question this is going to be more and more, you know, an international story, a global story than simply a domestic
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story. so yum! has had some problems with their u.s. business, a little better first quarter, but their business has been a little bit of a trouble spot for them. ours isn't going to be. i mean, we're still seeing growth in the u.s. we're going to generate some growth, but it's certainly not going to be on the same size and scale that we're going to get out of the international side. so more and more, that's what the story's going to be about. >> when i think of yum! i think of china, when i think of pete pizza hut -- when i think of domino's, should i be thinking of india? >> absolutely. that's been the fastest growing market for us with the largest global restaurant chain in india. they've averaged over 20% same-store sales growth over the course of the last five years. they opened 75 stores last year. it's really been a phenomenal story for us. but there are others. i mean, turkey has been growing incredibly fast for us. and uk continues along.
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and it's really balanced for us. but india has been a real star for us. and that's certainly something that we see continuing. >> pizza in my mind we attribute pizza hut's carry-out and strong dining sales, they are saying that pizza hut actually has exceeded your growth this quarter for the first time in ages. >> yeah, well, if you look back in two-year, three-year basis, it doesn't hold up the same. they've been kind of bouncing around a bit. but hey, we want to win every quarter. and we've won three year in a row, and we certainly hope we can continue that streak, but a little competition's a good thing. it makes you better. >> i like the parmesan bread bites but from your research and from the conference call that wasn't the home run that made a lot of people order pizza. you've had success after success after success with promotions. was this one just off? >> well, i think, you know, what it is, if you think about burgers, for instance. you're going to drive more
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orders when you talk about hamburger, but you need the fries along with it, because that's margin. that's what the parm bites do for us. nice add to the order. not going to drive as many orders as when you're talking about the pizza. and so it kind of came in about where we thought it was going to be. and again, 2%, that's kind of right where we think we're going to be long-term, 1% to 3% domestic. so play that out, if we can do that consistently, consistency becomes a big part of the story for us. >> pat, i want to circle back. that gigantic $1 billion in digital sales. i need to know two things. one is it mostly the apple app then of course the android, and two, how much apple versus android, and then 2.6 million people like you on facebook but we're hearing about how facebook is not turning out to be a generator for the kind of sales, this is a gm kind of line we're taking. facebook how valuable, apple how valuable? >> so we're still doing a lot more business mobile.
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we're in about 7% of our orders total are on mobile. we're still doing more on the apple app than on the android, although we launched the apple app about a year ago and the android more recently. so some of that's expected. facebook is working great for us. you know, google works great for us. online advertising works well for us. in fact, we're launching next week 50% off on any online order for the whole week to celebrate this billion dollar mark. and you're going to see us driving that online. it definitely works for us. >> i think that the stock has been in the penalty box, down a lot, but the story remains unchanged. i care about the long-term growth because that's the story. patrick doyle, ceo of domino's pizza, thanks for coming on the show. >> thanks, jim. >> revenues not as good as we would have liked but the stock much worse, maybe the stock's right. patrick doyle, president and ceo of domino's, i think the story
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is intact. stay with cramer. jim goes fast and furious as he faces a nonstop barrage of calls, giving stock after stock their final verdict on the lightning round. every year we pick a new city to explore. but thanks to hotwire, this year we got to take an extra trip. because they get us ridiculously low prices on really nice hotels and car rentals. so we hit boston in the spring-- even caught a game. and with the money we saved, we took a trip to san francisco. you see, hotwire checks the competitions' rates every day so they can guarantee their low prices. so, where to next? how about there? ♪ h-o-t-w-i-r-e... ♪
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tell us bobby, what would you do with all those savings? hire a better ventriloquist. your lips are moving. geico®. fifteen minutes could save you fifteen percent or more on car insurance. it is time, it is time for the lightning round! >> buy, buy, buy, buy, buy.
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>> then the lightning round is over. are you ready? we'll start with mike in california. >> caller: jim, this is mike from california. halfway between the sierras and the ocean, boo-yah to you from northern california. >> beautiful redlands, boo-yah back at you. >> caller: my question is with world economy falling the price of crude has dropped to the low 80s. shares of royal dutch shell have dropped 20% also. is this a buying opportunity? >> yes! actually when i was doing "street signs" today i was tempted to do one international stock. i talked about it with my fabulous executive producer. i was going to do royal dutch, i decided not to recommend world stocks, but yes, royal dutch is a -- >> buy, buy, buy. >> caller: yes, dr. cramer, my stock is united rental, symbol uri. >> because the economy has just stalled, i cannot push this
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stock as hard as i'd like. i will say it's okay because we need construction in this country to go to the next level. i'll go to mark in new york. >> caller: hi, jim, boo-yah, waited a long time to say that to you. >> excellent. >> caller: love your show. want to know what's going on with hackman. >> i am heckled constantly about heckmann. it's going to go lower. i've said that many -- it's going to go lower. look at halliburton, look at these stocks they're going lower because the price of natural gas has collapse. now that the price of oil has collapsed, i want to stick with hackmann because of the long-term these. jack in georgia. >> caller: thanks for your help and a big boo-yah from west palm beach. >> i'm liking that. right back at you. how can i help? >> caller: i have a small position in equity residential,
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eqr. i'm trying to decide whether to sell what i have or to add to it? >> no, don't sell that one. that's exactly in the sweet spot. eqr is one of my favorite stocks. i think you got a winner there. >> buy, buy, buy. >> we're going to bob in texas. bob? >> caller: hello, jim, i have a question on duke energy, symbol duk. what's your view on the impact of the pending merger on its stock price, do i buy or sell existing share before the merger becomes final? thanks for all you do, jim. >> listen, pilgrim, the duke is the king. i like duke, so i'm going to buy. lawrence in new york. lawrence? >> caller: hey, how you doing today, jim? >> well, a little distracted by some of the people over there who are doing some stuff. >> caller: from long island new york. >> oh, long island! i was there last weekend. fabulous. what's going on? >> caller: not too much. just bought some real estate and i just wanted to find out how
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roth i.r.a. investment beverage corp for speculation and berkshire hathaway. >> the speculation i'm not sure about, but berkshire hathaway it's a good stock but you got to hold it long term and it is worth more than what the stock is selling for. that ladies and gentlemen, is the conclusion of the lightning round! [ buzzer ] >> the lightning round is sponsored by td ameritrade. ♪ ♪ ♪ [ female announcer ] don't lose girls to dandruff. use axe anti-dandruff shampoo. ♪ lose the flakes. get the girls. only three girls in towels? amateur.
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mea culpa.
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about a month and a half ago i recommended men's wearhouse. big retailer of men's suits, dress shirt, tuxedos. i blew it. last night men's wearhouse reported a hideous quarter. i didn't want to look at it so nasty. falling 6.52. down 19%. now, pretty clear from these results that the people running mens wearhouse screwed up in a major way, too. but just because management screws up it doesn't mean we should, it doesn't mean we should fall prey. in other words, this company made some mistakes. however, the biggest mistake was my own for even recommending the stock. or at least for not telling you to sell it sooner. one of the hardest things when you're an investor is realizing when you've got something wrong and figuring out what to do about it. when you make a mistake -- [ buzzer ] -- as i clearly did, it's
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crucial that you try to learn from it so you don't repeat the same error in the future. that's why for tonight's sell block -- >> sell, sell, sell. >> -- i want to go over where i went wrong where mens wearhouse in order to deal with the stock picking blunder. it was a blunder. first of all, whenever a stock you like gets obliterated, you go through something like the five stages of grief. stage one, denial. where you think to yourself, i'm not wrong! it's the market that's wrong. but when the story as clear-cut as mens wearhouse, that denial, say it, rings hollow. the company did blow it. itself. mens wearhouse missed on earnings. two currents is real big deal in a growth stock. the company gave downside guidance like a trifecta of negativity. no silver lining here. hard to deny that the stock -- well, it deserved its 19%.
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so skip through the next three stages of stock, grief, anger, bargaining, depression and get to the last one, acceptance. i made a mistake recommending this stock. when the stock's down 19% in a single day, i own that mistake. i wear it so to speak. i got it wrong. i'm sorry for it. i can't criticize others unless i criticize myself. i'm kicking myself in the butt on this one. i could just blame the company for doing a bad job, but that would be intellectually dishonest and set a bad example. this is me at my most -- bunch of important lessons. ones that are so powerful you should write it down. first of all, too many reasons why i recommended the stock. one i thought it would benefit from the increase in hiring we'd seen in the first quarter, the increase in first quarter as more men with jobs equals more men who need to buy suits. and a trend we read about in "the new york times." a trend in men's wear in europe. these mom and pop shops had gone under.
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and i thought that was the culprit. i saw them taking market share from the moms and pops, where did i go wrong? what was i thinking? i should have immediately realized that mens wearhouse wouldn't sell as many suits as we expected. i told you to dump the stock then, i could have gotten you sidestepping in brutal decline. sure enough, even though mens wearhouse didn't address how the economy's doing on their conference call, they approached the results very much from a micro perspective on the call talking about how they didn't have the right of too many suits, in fact the suit sales were down 1.1%. the macro situation of the economy overall explains the shortfall better. we know the hiring of men who need suits, government worker, finance, is exactly where the slowdown is occurring. that's been an astounding 4% in same-store sales. that's terrible. but it could have been seen by
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me at joseph a. bank that reported a short time before mens wearhouse and was almost as disappointing. that was a great clue to pull in my bull horns. now to the company macro data. if you depend on something that's hiring, you can't rely on it in this economy, not any more. it goes for men's wearhouse, but a company like cintas. that's another one i liked, that rents out corporate uniforms. but after last friday's employment number, i got to be more circumspect about cintas, too. i talked about how mens wearhouse was seeing more interest from young consumers. young buyers only bought sportswear, which was up, not suits. we know from mobile talks with the ceo of j. crew, sportswear is notoriously hard to get into, saw that on david faber special last sunday night. by fault for not seeing the shift that are leading to new trends that are harder to predict. how about the idea that it's taking a lot of share from mom and pop stores?
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it doesn't make the company immune to the broader economic drop. secondly might be further along than the destruction of the local business cycle than we thought, meaning there's a lot less up side here from that trend. important when you're reading news stories that may tip off the these that you consider the timing. "the new york times" piece i cited talked about many stores that were already gone versus the few remaining holdouts. in other words, there's just not that much market share to take. it was a good theory. didn't pan out. because it might be more played out than i thought. so what do we do now with mens wearhouse? the quarter was bad. the stock's been severely punished. however, after this kind of miss, my rule of thumb is that the stock needs to stay in the penalty box for at least one quarter before you can go near it. i might be willing to make an exception if management said the weakness was a one-time thing, they didn't. or make a big buy back to capitalize on the stock price, they didn't. or if they have a plan for solving the problems. they didn't. at least in the conference call they said they'd address the
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problems at a later date. but the ceo said he misjudged things but failed to say how he would fix anything. maybe can, maybe he's a genius, but that didn't inspire any confidence. they said the second half would be better, yet they don't give us any details on how they get the company back on track. mens wearhouse stays in the penalty box until they can give us a decent quarter. the bottom line, mea culpa, i messed up with mens wearhouse. i shouldn't have got behind that as a mom and pop slayer because they'd been shut down and i shouldn't have told you to sell it as a hiring play. the moment we got that bad report on friday. because i told you to buy it on previous points. my bad. you have to sell mens wearhouse even after today's huge decline because it can get worse before it gets better. mens wearhouse, i no longer like the way it look. lynn in new york. >> caller: hi, jim, this is lynn from rochester, new york. >> how is it going, man? rochester big and tall.
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>> caller: the home of what's left of eastman kodak, america's memory capturer. my question is on urban outfitters. the stock's done virtually nothing for years and most of the sales are domestic. the stock had a small bounce when they announced that they saw opportunities for expansion in europe. is this a good time to get into the stock at these levels? >> i was a big fan of the previous ceo, then he kind of went downhill. this new ceo and the look they were very positive, they were very excited. they should have been more muted. i'm not ready to declare urban outfitters ready to buy. and i think the downfall of kodak was after draper left the camp because the carousel campaign was fantastic. they should never have lost that account, but they lost lucky strike, too. let's go to dan in california. >> caller: hello, oh, hi, jim. this is dan from north
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hollywood, california . >> how are you? >> caller: oh, pretty good. i've been trying to get in with the brown shoe company. i was in business with it for many year. i'd like to know is it now the chance to buy from them? >> i got no real catalyst there. and we know that the shoe bull market has been bifurcated. decker's, the brown shoe has been tough to figure. wolverine is still doing well, nike's doing well. those are the two that i'm going to stick by, particularly nike. all right. nw? let's just say it wore out and i am owning it. it was up to me to get this right. and i didn't take into account the big macro factors that were obvious to everyone. my bad. after the break, i'll try to make you -- i'll save you a little money. stay with cramer. another cup of coffee? how long is this one going to last? forty-five minutes? an hour? well... listen. 5-hour energy lasts a whole lot of hours.
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remember earnings reports? [ buzzer ] in another 30 day, they're the holy grail of predicting stocks. as the ability or inability of companies to beat sales and earnings estimates and guy higher or lower when they report. often controls whether a given stock goes -- >> buy, buy, buy. >> or. >> sell, sell, sell. >> if the company can beat expectations, bottom line it is likely to go higher. if the company just meets expectations majority of the time it falls slightly, if it fails to beat them or falls far short of them, then the stock
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gets crushed. >> the house of pain. >> tempur-pedic. if you look at that, look at it like this -- it's been cut in half. it could be cut in half. because it missed so badly. or men's wearhouse where estimates were very much out of reach and it caused the stock to be hammered mercilessly. shows you the power of missed estimates. there's almost a total dearth of earnings reports because we tend to forget about their importance even with ugly surprises like men's wearhouse and tempur-pedic we switch to the macro and shoehorn the micro. we employ the broader economy wide themes to stocks and we use deductive reasoning. we begin to use group thick or sector thick since the big hedge funds don't do the research necessary. based on a fed speech, spanish bond auction. these macro moves are often very wrong. and even more misleading, which
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is why right now, you need to be extremely aware of stocks that have moved higher during this rally, particularly these that have been running and gunning on the prospects of the european deal and fed easing. we saw the pain these stocks can suffer this afternoon when the averages reversed dramatically going into the close. that's why i've been urging you to reposition and the dividend yielding plays that have been given up. for example, the other day a brokerage house squawked that google may be giving up. it is a giant for the internet search colossus. stock took a hit for a minute. in this morning's chinese rate cut before giving up its gains this afternoon. the move up in google was about as stupid as it gets fp bank deal wouldn't impact european advertising all that much. it wouldn't cure what's happened this quarter already. second, china? please. google left the chinese market because of censorship
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concerns. here's what is important. if google does guide down because of europe, the stock will be crushed, even as the company would be giving us the same info foretold by the analysts negative report. keep that in mind, banks can't make as much money as they like when rates are this low. in five weeks we'll find out just how bad things are in tech and the banks and i think they're plenty bad. this morning the macro gunslingers gave you an opportunity to trim and reposition to the pepsi's, safe, consistent companies with robust dividends. con-ed. you missed your chance. don't worry, you'll get another macro driven rally soon enough that you can use to reposition your portfolio. believe me, a month from now, you'll wish you had. stay with cramer. we love theme parks but with four kids, it can just be too expensive. yeah, so to save money we just made our own. oh no! what could be worse than ninety-foot swells?! typhoon! first prize! it's a cheese grater. wooooo... this isn't scary.
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are you kidding me? look at that picture of your mom's hair from the '80s. there's an easier way to save. wooohooo... geico. fifteen minutes could save you fifteen percent or more on car insurance. ball. ball.of bat ] [ crack of bat ] [ male announcer ] hanging out with cal has its benefits... so does taking one a day men's. go to "" to enter for a chance to meet me and watch the 2013 mlb all star game.
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seconds away on the kudlow okay. so china's good, europe still not so good. china, i still believe, would not act unless something's in the works, but spain felt very emboldened. the problem is i'm talking about spain and china wh i


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